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VMware, Inc. (VMW)
Q4 2009 Earnings Call
January 25, 2010 5:00 pm ET
Michael Haase – Vice President of Investor Relations
Paul A. Maritz – President, Chief Executive Officer & Director
Tod Nielsen – Chief Operating Officer
Mark S. Peek – Chief Financial Officer & Senior Vice President
Adam Holt – Morgan Stanley
Heather Bellini – ISI
Derek Bingham – Goldman Sachs
John DiFucci – JP Morgan
Brent Williams – Benchmark
Laura Lederman – William Blair & Co.
Kash Rangan – Merrill Lynch
Kaushik Roy – Wedbush Morgan Securities
Jason Nolan – Robert W. Baird & Co.
Brian Marshall – Broadpoint
Previous Statements by VMW
» VMware, Inc. Q3 2009 (Qtr End 9/30/09) Earnings Call Transcript
» VMware, Inc. Q2 2009 Earnings Call Transcript
» VMware, Inc. Q1 2009 Earnings Call Transcript
Welcome to VMware’s fourth quarter and full year 2009 earnings conference call. On the call we have Paul Maritz, CEO; Tod Nielsen, COO; and Mark Peek, our CFO. Following their prepared remarks we will take your questions. This call is being simultaneously webcast on our website. Our press release was issued after close of market and is also on our website.
Statements made on this call that are not statements of historical fact are forward-looking statements subject to Safe Harbor provisions. This includes statements with the words will, believes, expects, continues and similar phrases that denote future expectation or intent. This includes but is not limited to statements regarding our financial outlook, future product offerings and future demand.
These statements are based on current expectations as of the date of this call and are subject to uncertainties and changes in conditions, significance, value and effects as well as other risks detailed in documents filed with the Securities & Exchange Commission including our quarterly report on Form 10Q for the period ending September 30, 2009 that may cause actual results to differ materially from those set forth in our statements.
In addition, during today’s call we will discuss certain non-GAAP financial measures. These non-GAAP financial measures which are used as measures of VMware’s performance should be considered in addition to not as a substitute for or in isolation from GAAP measures. Our non-GAAP measures exclude the effects on our GAAP results of stock-based compensation, amortization of intangible assets, employer payroll tax and employee stock transactions, the net effect of amortization and capitalization of software and acquisition related items.
You can find additional disclosures regarding this non-GAAP measures including reconciliations with comparable GAAP measures in our earnings release for the period ended December 31, 2009 and on the investor relations page of our website. The webcast replay of this call will be available for the next 30 days on our company website under the investor relations link. Our first quarter quiet period begins at the close of business March 17, 2010. Also, unless otherwise stated all financial comparisons in this call will be in reference to our results for the comparable period of 2009.
With that, let me hand it over to Mark.
Mark S. Peek
Before I address Q4 and 2010, I want to spend a minute looking back on 2009. We are pleased with how far we have come and what we achieved during 2009. Despite very difficult global economic conditions, we successfully delivered on two major product releases vSphere and View 4, began billing and collecting in local currency and invested in our global market footprint. We also joined forces with SpringSource and the integration of people, products and culture has gone very well.
In summary, we are pleased with how we weathered 2009 and although license revenue declined 13% during the year, we achieved 8% growth and significantly increased our deferred revenue and cash. Full year free cash flows were $840 million, an increase of 39% from a year ago. Our cash flows performance reflects good execution and cost management, strong product releases and a customer base that clearly finds significant value in our products. Free cash flow per share was $2.10 an increase of 38% over 2008.
We ended 2009 with an outstanding fourth quarter including record revenue and non-GAAP operating profit. Although there continues to be concern around the global economy, we certainly have better short term visibility than we had in the first three quarters of 2009. Revenues for the fourth quarter were $608 million, an increase of 18% from a year ago and 24% sequentially.
During the quarter we had a particular focus on upgrading customers to vSphere Enterprise Plus. The field and our channel did a great job of executing on this promotion, driving more than $100 million in total upgrade bookings. The fourth quarter was also marked by pent up demand on the part of our customers and we definitely believe we were the beneficiary of Q4 capital spending. So although we are very pleased with our performance during the fourth quarter, we approach 2010 cautiously with an understanding that the world is fragile both politically and economically.
Q4 license revenue were $304 million. Although down 3% from last year, license revenue increased 27% sequentially. The software maintenance portion of our services revenues was $246 million, up 53% compared to last year. With the launch of vSphere, certain customers needed to be brought current on their maintenance to receive their upgrade to vSphere. From a revenue perspective, the back maintenance revenue recognized in Q4 more than doubled over last year. We have been focusing on recovering back maintenance for the past three quarters and as a result for Q1 we expect back maintenance to be down sequentially. In total, renewal bookings grew approximately 67% compared to the fourth quarter of 2008.